EXHIBIT 99.1
(ENTERPRISE PRODUCTS PARTNERS L.P. LOGO)
Enterprise Products Partners L.P.
P.O. Box 4324
Houston, TX 77210
(713) 880-6500
ENTERPRISE REPORTS FIRST QUARTER 2004 RESULTS;
ANNOUNCES COMPLETION OF PROGRAM TO RENEGOTIATE GAS PROCESSING CONTRACTS
Houston, Texas (Thursday, April 22, 2004) - Enterprise Products
Partners L.P. (NYSE: "EPD") today announced its financial results for the first
quarter ended March 31, 2004.
Enterprise reported net income of $58.5 million, or $0.23 per unit on a
fully diluted basis for the first quarter of 2004. Included in net income for
the first quarter was a non-cash benefit of $7.0 million, or $0.02 per unit net
of minority interest, for the cumulative effect of a change in an accounting
method. Net income for the first quarter of 2003 was $40.5 million, or $0.19 per
unit on a fully diluted basis. Included in net income for the first quarter of
last year was a non-cash charge to interest expense of $11.3 million, or $0.06
per unit, for the write-off of unamortized financing costs related to the early
repayment of the term loan used to initially finance the acquisition of the
Mid-America and Seminole pipeline systems.
Distributable Cash Flow for the first quarter of 2004 was $85.8 million
compared to $94.2 million for the first quarter of 2003 and $68.2 million in the
fourth quarter of 2003.
"With the improvement in the overall economy, we have experienced a
significant increase in demand for our midstream energy services compared to the
second half of 2003 as reflected by our financial performance for the first
quarter of 2004," said O.S. "Dub" Andras, President and Chief Executive Officer
of Enterprise. "Gross operating margin for the first quarter of 2004 was the
third highest on record and increased by 19% over the fourth quarter of 2003.
Contributing to this increase was increased margin in our Processing and
Pipeline segments, including the equity income from our 50% ownership in the
general partner of GulfTerra Energy Partners, L.P."
"As we begin the second quarter, our business fundamentals continue to
improve. Our largest NGL-consuming customers are experiencing stronger demand
for their products and they believe that this will be sustainable throughout
2004. In addition, natural gas prices have decreased relative to other forms of
energy. During 2003, natural gas prices averaged 100% of crude oil prices on an
energy equivalent basis compared to 93% during the first quarter of 2004. This
has made NGLs more competitive versus crude oil derivatives as a feedstock for
ethylene production. We have seen this and higher ethylene production rates
translate into increased demand for ethane. Average ethane demand by the
ethylene industry for the first quarter of 2004 was 718,000 barrels per day,
which is comparable to the fourth quarter of 2003 and represents a 13% increase
from the trough conditions that existed in the second and third quarters of
2003. The five-year average demand for ethane has been 750,000 barrels per day,"
said Andras.
Revenue for the first quarter of 2004 increased 15% to $1.7 billion
from $1.5 billion in the first quarter of last year. Operating income for the
first quarter of 2004 was $87.3 million compared to $85.0 million in the first
quarter of 2003 and $66.1 million for the fourth quarter of 2003. Gross
operating margin increased to $129.7 million for the first quarter of 2004
compared to $126.4 million for the same quarter in 2003 and $109.0 million for
the fourth quarter of 2003.
PIPELINES - Gross operating margin from the Pipelines segment increased
by $11.1 million, or 15%, to $83.0 million for the first quarter of 2004 from
$71.9 million in the first quarter of 2003. Gross operating margin from the
Pipelines segment for the first quarter of 2004 increased by $10.6 million
compared to $72.4 million reported in the fourth quarter of 2003. Pipeline
volumes for the first quarter of
2004 increased 8% to 1,706,000 equivalent barrels per day (BPD) compared to
1,585,000 equivalent BPD in the first quarter of 2003.
Net natural gas liquids (NGLs) and petrochemical volumes handled by the
Pipelines segment in the first quarter of 2004 increased by 8% to 1,423,000 BPD
compared to 1,313,000 BPD in the first quarter of 2003. Net natural gas volumes
transported in the first quarter of 2004 were 1,075 billion British thermal
units per day (BBtud), an increase of 4% from 1,034 BBtud transported during the
first quarter of 2003.
Gross operating margin from the Mid-America and Seminole pipelines for
the first quarter of 2004 was $43.0 million compared to $47.5 million for the
first quarter of 2003 and $36.2 million for the fourth quarter of 2003. Total
volumes for these two pipelines increased by 14,000 BPD to 830,000 BPD for the
first quarter of 2004 versus 816,000 BPD in the first quarter of 2003. Volumes
for the first quarter of 2004 increased by 42,000 BPD from 788,000 BPD in the
fourth quarter of 2003.
Gross operating margin for the first quarter of 2004 included $10.6
million in equity income associated with our 50% ownership in the general
partner of GulfTerra Energy Partners, L.P. that was acquired in December 2003.
Increases in gross operating margin from our NGL and petrochemical storage
business, Acadian natural gas pipeline, NGL import facility and petrochemical
pipelines more than offset a decrease in gross operating margin from the Lou-Tex
NGL pipeline and certain Gulf of Mexico offshore pipelines and an increase in
pipeline integrity expense.
Pipeline integrity expense for the first quarter of 2004 was
approximately $1.2 million compared to $0.1 million in the first quarter of
2003. In addition, approximately $0.8 million of pipeline integrity costs were
capitalized during the first quarter of 2004 compared to $0.4 million in the
first quarter of last year. Capitalized pipeline integrity costs are included in
our sustaining capital expenditures.
FRACTIONATION - Gross operating margin for the Fractionation segment
was $30.3 million for the first quarter of 2004 compared to $29.0 million for
the first quarter of 2003. Increases in gross operating margin from the NGL and
propylene fractionation businesses more than offset a decline from the butane
isomerization business.
Gross operating margin for the NGL fractionation business increased by
$0.8 million during the first quarter of 2004 compared to the first quarter of
2003. Increased volumes and percent of liquids fees at the Norco fractionator
more than offset the effect of lower volumes at the Mont Belvieu fractionator.
Norco was expanded in the fourth quarter of 2003, increasing its capacity to
75,000 BPD. With the additional capacity, Norco benefited during the quarter
from fractionating volumes of mixed NGLs produced from processing plants in
Louisiana, which have historically been fractionated at either our Toca-Western
or Venice fractionators or transported on our Lou-Tex NGL pipeline to our Mont
Belvieu facility for fractionation.
Gross operating margin from the propylene fractionation business
increased by $4.9 million during the first quarter of 2004 compared to the first
quarter of 2003 due to improved unit margins, which more than offset a 6,000 BPD
decrease in net propylene fractionation volumes. Gross operating margin from the
butane isomerization business decreased by $2.6 million due to a 20,000 BPD
decrease in volumes for the first quarter of this year compared to the first
quarter of 2003. This decrease was largely due to plant turnarounds taken during
the first quarter of 2004 by two of our major customers. Both plants have since
returned to service.
PROCESSING - Gross operating margin for the Processing segment was
$18.1 million for the first quarter of 2004 compared to $30.0 million for the
first quarter of 2003. The first quarter of 2003 had a higher gross operating
margin from NGL marketing activities because of unusually strong demand for
propane and normal butane during that quarter. Gross operating margin for the
Processing segment in the first quarter of 2004 increased by $13.5 million
compared to the $4.6 million earned in the fourth quarter of 2003.
Equity NGL production was 64 MBPD for the first quarter of 2004
compared to 54 MBPD for the first quarter of 2003. Fee-based processing volumes
increased from 65 MMcfd in the first quarter of 2003 to 362 MMcfd in the first
quarter of the current year.
In our acquisition of Shell's midstream energy business in 1999, we
assumed a large portfolio of keepwhole processing contracts. Under these
keepwhole contracts, processors take title to the NGLs removed from the natural
gas stream and compensate the producer for the amount of energy extracted based
on the price of natural gas. In the past few years, natural gas supply and
demand imbalances have caused volatility in the price of natural gas and a trend
where its price has increased relative to other forms of energy, including NGLs,
for extended periods of time. As a result, the traditional keepwhole
arrangements have become economically obsolete and the gas processing industry,
including Enterprise, has been in the process of restructuring these contracts
to eliminate the earnings volatility.
Prior to actions that we began in 2003 to restructure these
arrangements, approximately 70% of the natural gas we processed was under
keepwhole contracts. We recently completed a program to convert essentially all
of our keepwhole contracts to other types of agreements where the producer
assumes all or most of the direct commodity price risk between NGLs and natural
gas. These include simple fee-based agreements, fee-based agreements with margin
sharing mechanisms; and percent-of-liquids agreements.
Beginning April 1, 2004, approximately 66% of the 2.1 Bcfd of natural
gas that we expect to process, or 1.4 Bcfd, will have a fee-based component.
This compares to less than 50 million cubic feet per day (MMcfd) of fee-based
processing volumes prior to the restructuring. Approximately 34% of the gas that
we currently expect to process, or 700 MMcfd, will be under percent-of-liquids
agreements compared to approximately 500 MMcfd, previously. Our share of NGLs
earned under these types of agreements is expected to be 4.5 MBPD compared to
approximately 3.5 MBPD prior to our restructuring efforts.
On an annual basis, we estimate that the total processing revenues from
the fees and the value of the NGLs that we retain under percent-of-liquids
agreements has increased from approximately $28 million under our legacy
portfolio of contracts to approximately $62 million based on today's contract
mix and expected 2004 activity. In these estimates, the value of the NGLs earned
under the percent-of-liquids agreements is based on current NGL prices. Our
revenues under these contracts will be affected by the volume of gas delivered
to our plants for processing, the NGL-content of the gas, the amount of NGLs
extracted and the price realized for our share of the NGLs.
To provide our partnership with the opportunity to earn additional
gross operating margin above that provided by the fee-based and
percent-of-liquids arrangements and to align our interest with certain
producers, some of our contracts provide an ability to participate in margin
sharing arrangements in addition to fees without exposing our partnership to the
risk of an incremental cash loss from these sharing mechanisms. Approximately
50% of the gas that we expect to process in 2004 is under these types of
agreements.
Had all of the contract conversions been in effect at January 1, 2004,
we estimate that our operating income for the first quarter of 2004 would have
increased by approximately $5.6 million. We believe these contract conversions
will result in Enterprise being fairly compensated for this critical midstream
service while providing producers with assurance that their processing
agreements are operative regardless of natural gas price. We also believe these
new agreements will provide our partnership with a more consistent base of
revenue and gross operating margin from our gas processing business, greatly
reduce the direct commodity price risk that previously existed under traditional
keepwhole arrangements and provide a more reliable return on our investment.
We continue to expect our merger with GulfTerra Energy Partners, L.P.
to be completed during the second half of 2004. In anticipation of this and the
long-term debt that we expect to issue to refinance GulfTerra's indebtedness, we
executed a program in March 2004 to hedge the interest rate risk associated with
up to $2.0 billion of debt that we expect to issue. At the close of business
yesterday, the value of our portfolio of interest rate hedges was approximately
$109 million.
Gross operating margin represents operating income before depreciation,
amortization, lease expense for which Enterprise does not have the payment
obligation, general and administrative expenses and gain or loss on sale of
assets. Enterprise's equity earnings from unconsolidated affiliates are included
in gross margin. Pipeline volumes expressed in terms of equivalent barrels per
day ("BPDE") are on an energy equivalent basis where 3.8 million British thermal
units ("MMBtu") of natural gas are equivalent to one barrel of NGLs. We have
reconciled gross operating margin (a non-GAAP performance measure) to operating
income.
Several adjustments to net income are required to calculate
Distributable Cash Flow. These adjustments include: (1) depreciation and
amortization expense; (2) operating lease expenses for which the partnership
does not have the payment obligation; (3) cash distributions received from
unconsolidated affiliates less equity in income from such unconsolidated
affiliates; (4) the subtraction of sustaining capital expenditures; (5) the
addition of losses or subtraction of gains relating to the sale of assets; (6)
cash proceeds from sale of assets; (7) the addition of decreases or the
subtraction of increases in the value of our financial instruments portfolios;
and (8) the addition of losses or subtraction of gains relating to other
miscellaneous non-cash amounts affecting net income for the period.
Distributable cash flow is before reserves established for the purpose of
funding future expansion or sustaining capital expenditures, debt reduction and
cash distributions to the limited partners and general partner. We have
reconciled Distributable Cash Flow (a non-GAAP liquidity measure) to cash flow
from operating activities.
EBITDA is defined as net income plus interest expense, provision for
income taxes and depreciation and amortization amounts. We have reconciled
EBITDA (a non-GAAP liquidity measure) to net income and cash flow from operating
activities.
Enterprise Products Partners L.P. is the second largest publicly-traded
midstream energy partnership with an enterprise value of over $7 billion.
Enterprise is a leading North American provider of midstream energy services to
producers and consumers of natural gas and natural gas liquids ("NGLs"). The
Company's services include natural gas transportation, processing and storage
and NGL fractionation (or separation), transportation, storage and import/export
terminaling.
Today, Enterprise will host a conference call to discuss first quarter
earnings. The call will be broadcast live over the Internet at 5:30 p.m. Eastern
Time and may be accessed by visiting the company's website at www.epplp.com.
Participants should access the "Investor Information" section of the website at
least ten minutes prior to the start of the conference call to download and
install any necessary audio software.
This press release contains various forward-looking statements and
information that are based on the Company's beliefs and those of its general
partner, as well as assumptions made by and information currently available to
the Company. When used in this press release, words such as "anticipate,"
"project," "expect," "plan," "goal," "forecast," "intend," "could," "believe,"
"may," and similar expressions and statements regarding the plans and objectives
of the Company for future operations, are intended to identify forward-looking
statements. Although the Company and its general partner believe that such
expectations reflected in such forward-looking statements are reasonable,
neither the Company nor its general partner can give assurances that such
expectations will prove to be correct. Such statements are subject to a variety
of risks, uncertainties and assumptions. If one or more of these risks or
uncertainties materialize, or if underlying assumptions prove incorrect, the
Company's actual results may vary materially from those the Company anticipated,
estimated, projected or expected. Among the key risk factors that may have a
direct bearing on the Company's results of operations and financial condition
are:
o fluctuations in oil, natural gas and NGL prices and production due
to weather and other natural and economic forces;
o a reduction in demand for the Company's products by the
petrochemical, refining or heating industries;
o a decline in the volumes of NGLs delivered by the Company's
facilities;
o the failure of the Company's credit risk management efforts to
adequately protect it against customer non-payment;
o the failure to successfully integrate new acquisitions; and
o terrorist attacks aimed at the Company's facilities.
The Company has no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
Contact: Randy Burkhalter, Director of Investor Relations, Enterprise Products
Partners L.P. (713) 880-6812, www.epplp.com
###
ENTERPRISE PRODUCTS PARTNERS L.P.
CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS - UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in thousands, except per unit amounts)
2004 2003
----------- -----------
Revenue $ 1,704,890 $ 1,481,586
Costs and expenses:
Operating costs and expenses 1,621,508 1,386,704
Selling, general and administrative 9,466 11,471
----------- -----------
Total costs and expenses 1,630,974 1,398,175
----------- -----------
Earnings from equity method unconsolidated affiliates 13,398 1,621
----------- -----------
Operating income 87,314 85,032
----------- -----------
Other income (expense):
Interest expense (32,618) (41,911)
Dividend income from unconsolidated affiliate 1,250 2,601
Other, net 161 234
----------- -----------
Total other income (expense) (31,207) (39,076)
----------- -----------
Income before provision for taxes, cumulative effect
of change in accounting principle and minority interest 56,107 45,956
Provision for taxes (1,625) (3,129)
----------- -----------
Income before cumulative effect of change in
accounting principle and minority interest 54,482 42,827
Minority interest (2,954) (2,322)
----------- -----------
Income before cumulative effect of change in
accounting principle 51,528 40,505
Cumulative effect of change in accounting principle 7,013
----------- -----------
Net income $ 58,541 $ 40,505
=========== ===========
Allocation of net income to:
Limited partners $ 51,219 $ 36,368
=========== ===========
General partner $ 7,322 $ 4,137
=========== ===========
Per unit data (fully diluted):
Net income per unit $ 0.23 $ 0.19
Average limited partner units outstanding (000s) 218,960 196,191
Other Financial data:
Operating activities cash inflow $ 23,780 $ 151,549
Investing activities cash outflow $ (15,811) $ (73,093)
Financing activities cash inflow (outflow) $ 534 $ (69,684)
Distributable cash flow $ 85,758 $ 94,220
Depreciation and amortization $ 31,385 $ 39,261
Operating lease expense paid by EPCO $ 2,273 $ 2,274
Distributions received from unconsolidated affiliates $ 15,682 $ 15,626
Non-cash income (loss) related to hedging
activities (mark-to-market valuations) $ (3) $ 28
Sustaining capital expenditures $ 4,162 $ 2,252
Total capital expenditures $ 15,002 $ 23,835
Investments in and advances to (from)
unconsolidated affiliates $ 818 $ 20,509
Total debt principal outstanding at end of period $ 2,209,000 $ 2,006,000
</Table>
ENTERPRISE PRODUCTS PARTNERS L.P.
CONDENSED GROSS OPERATING MARGIN AND OPERATING DATA - UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in thousands, volumes as stated)
2004 2003
--------- ---------
Gross operating margin by segment ($000s):
Pipelines $ 82,985 $ 71,932
Fractionation 30,260 29,047
Processing 18,065 29,956
Octane enhancement (a) (1,266) (3,441)
Other (372) (1,056)
--------- ---------
Total gross operating margin $ 129,672 $ 126,438
Depreciation and amortization 30,520 27,657
Operating lease expense paid by EPCO 2,273 2,274
Loss on sale of assets 99 4
Selling, general and administrative expenses 9,466 11,471
--------- ---------
Operating income $ 87,314 $ 85,032
========= =========
- ----------
(a) Prior to October 1, 2003, our 33 1/3% ownership interest in Belvieu
Environmental Fuels ("BEF") was recorded under the equity method of accounting.
On September 30, 2003, we increased our ownership interest in this facility to
66 2/3%. As a result, we began consolidating the financial statements of BEF
with those of our own beginning with the fourth quarter of 2003.
Selected volumetric operating data:
Pipelines, net volumes as shown
NGL and petrochemical liquids pipelines (MBPD, net) 1,423 1,313
Natural gas pipelines (BBtus per day, net) 1,075 1,034
Combined energy equivalent (MBPD, net) 1,706 1,585
Fractionation, net volumes in MBPD
NGL fractionation 229 235
Propylene fractionation 54 60
Isomerization 60 80
Natural gas processing, net volumes as shown
Fee-based natural gas processing (Mmcf per day, net) 362 65
Equity NGL production (MBPD, net) 64 54
Octane enhancement, net volumes in MBPD 5 3
</Table>
ENTERPRISE PRODUCTS PARTNERS L.P.
CONDENSED DILUTED EARNINGS PER UNIT AND PRO FORMA INFORMATION REGARDING
CHANGE IN ACCOUNTING PRINCIPLE - UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in thousands, except per unit amounts)
2004 2003
----------- -----------
Income before cumulative effect of change in
accounting principle and minority interest $ 54,482 $ 42,827
Minority interest (2,954) (2,322)
----------- -----------
Income before cumulative effect of change in accounting principle 51,528 40,505
Cumulative effect of change in accounting principle 7,013
----------- -----------
Net income $ 58,541 $ 40,505
=========== ===========
Per unit data (fully diluted):
Income before cumulative effect of change in
accounting principle and minority interest $ 0.25 $ 0.22
Minority interest (0.01) (0.01)
Cumulative effect of change in accounting principle from the
accrue-in-advance method to the expense-as-incurred method
for planned maintenance activities of subsidiary 0.03
----------- -----------
Net income per unit before general partner interest 0.27 0.21
General partner interest (0.04) (0.02)
----------- -----------
Net income per unit $ 0.23 $ 0.19
=========== ===========
Average LP units outstanding (000s) 218,960 196,191
=========== ===========
Pro forma amounts assuming the new method of accounting for major maintenance
costs of subsidiary is applied retroactively:
Income before minority interest $ 54,482 $ 41,846
=========== ===========
Net income $ 53,866 $ 39,534
=========== ===========
Pro forma per unit data (fully diluted):
Income before minority interest $ 0.25 $ 0.21
Minority interest (0.01) (0.01)
----------- -----------
Net income per Unit before general partner interest 0.24 0.20
General partner interest (0.03) (0.02)
----------- -----------
Net income per unit $ 0.21 $ 0.18
=========== ===========
</Table>
ENTERPRISE PRODUCTS PARTNERS L.P. PART I
RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES - UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in thousands)
2004 2003
--------- ---------
Reconciliation of Non-GAAP "Total Gross Operating Margin" to
GAAP "Operating Income"
Operating Income $ 87,314 $ 85,032
Adjustments to derive Total Gross Operating Margin:
Depreciation and amortization in operating costs and expenses 30,520 27,657
Retained lease expense, net, in operating costs and expenses 2,273 2,274
Loss on sale of assets in operating costs and expenses 99 4
Selling, general and administrative costs 9,466 11,471
--------- ---------
Total Gross Operating Margin $ 129,672 $ 126,438
========= =========
Reconciliation of Non-GAAP "EBITDA" to GAAP "Net Income" and
GAAP "Cash Flow from Operating Activities"
Net income $ 58,541 $ 40,505
Adjustments to derive EBITDA:
Interest expense (including amortization component) 32,618 41,911
Provision for income taxes 1,625 3,129
Other depreciation and amortization 30,586 27,679
--------- ---------
EBITDA $ 123,370 $ 113,224
Reconciliation of "EBITDA" to "Cash Flow from Operating Activities":
Leases paid by EPCO, net (excluding minority interest portion) 2,273 2,251
Deferred income tax expense, net of provision for
current period income taxes 62 (396)
Changes in fair market value of financial instruments 3 (28)
Minority interest 2,954 2,321
Interest expense, net of amortization component (31,819) (30,329)
Equity in income of unconsolidated affiliates (13,398) (1,621)
Distributions received from unconsolidated affiliates 15,682 15,626
Net effect of changes in operating accounts (75,446) 50,497
Loss on sale of assets 99 4
--------- ---------
Cash Flow from Operating Activities $ 23,780 $ 151,549
========= =========
</Table>
ENTERPRISE PRODUCTS PARTNERS L.P. PART II
RECONCILIATION OF UNAUDITED GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES - UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in thousands)
2004 2003
--------- ---------
Reconciliation of Non-GAAP "Distributable Cash Flow" to GAAP
"Net Income" and GAAP "Cash Flow from Operating Activities"
Net income $ 58,541 $ 40,505
Adjustments to derive Distributable Cash Flow:
Leases paid by EPCO, net (excluding minority interest portion) 2,273 2,251
Minority interest in leases paid by EPCO 22
Equity in income of unconsolidated affiliates (13,398) (1,621)
Distributions received from unconsolidated affiliates 15,682 15,626
Cumulative effect of change in accounting principle, net (4,675)
Loss on sale of assets 99 4
Proceeds from sale of assets 10 34
Sustaining capital expenditures (4,162) (2,252)
Changes in fair market value of financial instruments 3 (28)
Amortization in interest expense 799 11,582
Other depreciation and amortization 30,586 27,679
Other 418
--------- ---------
Distributable Cash Flow $ 85,758 $ 94,220
Reconciliation of "Distributable Cash Flow" to
"Cash Flow from Operating Activities":
Sustaining capital expenditures 4,162 2,252
Deferred income tax expense 1,687 2,733
Proceeds from sale of assets (10) (34)
Cumulative effect of change in accounting principle, net 4,675
Minority interest in income not included in
calculation of Distributable Cash Flow 2,954 1,903
Minority interest of General Partner in Operating
Partnership's allocation of leases paid by EPCO (22)
Net effect of changes in operating accounts not already
included in calculation of Distributable Cash Flow (75,446) 50,497
--------- ---------
Cash Flow from Operating Activities $ 23,780 $ 151,549
========= =========
</Table>